The Spanish bailout has triggered a big ongoing debate on the issue of seniority for public creditors. Certain commentators and market actors claim that it is because the European Stability Mechanism (ESM) sees itself as a preferred creditor that the announcement of a Spanish bailout has led to rising spreads. They say that seniority means that once the ESM comes in, it reduces the effective claims of the private bondholders in the event of a restructuring.
This piece exposes the flaws in this thinking both in the general case and more particularly in the case of Spain. We conclude that if the EU wants to rescue Spain, the trick is not to remove seniority from the ESM but 1) to remove all uncertainties around the future of the Eurozone 2) make conditionality more growth friendly 3) channel the bailout directly to needy banks without going through the sovereign.
6 hours 24 min ago —
The #bankingunion is essentially a back door covert #fiscalunion
8 hours 21 min ago —
I thought those calling 4 a #Lehman like moment in #EU were idiots; I am starting 2 think I was an idiot 4 calling them names - complacency
18 hours 57 min ago —
Irony? “@moorehn: I assume UK will stop criticizing US gun laws after meat-cleaver street beheading? http://t.co/sb5mLVZ1Xj”
20 hours 9 min ago —
I will be defending the #FTT (the concept not necessarily the #EU model) at a panel discussion at #CSFI tomorrow cc @robinhood@oxfamgb
20 hours 29 min ago —
Would you agree that a) wealth should be taxed b) income should be taxed (ideally at the same rate) no matter what it's source?
The Spanish bailout has triggered a big ongoing debate on the issue of seniority for public creditors. Certain commentators and market actors claim that it is because the European Stability Mechanism (ESM) sees itself as a preferred creditor that the announcement of a Spanish bailout has led to rising spreads. They say that seniority means that once the ESM comes in, it reduces the effective claims of the private bondholders in the event of a restructuring.